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Homework answers / question archive / If people expect this period's inflation is equal to last period's inflation, an increase in the price of oil in the medium run will cause: O a

If people expect this period's inflation is equal to last period's inflation, an increase in the price of oil in the medium run will cause: O a. A reduction in output b. An increase in the real policy rate All of the answers here are correct Od Od. An increase in the price level Oe. An increase in the natural rate of unemployment Q2 Suppose the Okun's Law is: u – u(-1) = -0.5(gy – 3%). What should be the growth rate of output, Iya if the unemployment rate, u, is to be reduced by 1%? O a. 0.5% O b. All of the answers here are incorrect Oc 3% O d. 5% O e. 296 Suppose the economy is initially in the medium run equilibrium. Then the government implements an expansionary fiscal policy by reducing taxes. If people's expectations of Q3 inflation is not anchored but is equal to last period's inflation, what will be the policy interest rate, consumption, investment and inflation compared to their initial values when the medium run equilibrium is restored again such that output returns directly to its initial value without a recessionary adjustment? O a. The policy rate of interest has increased, consumption has increased, investment has decreased and a higher level of inflation ob. The policy rate of interest has decreased, consumption has increased investment has increased and the level of inflation returns to its initial value Oc The policy rate of interest has increased, consumption has increased, investment has decreased and the level of inflation returns to its initial values O d. The policy rate of interest has increased, consumption has decreased investment has increased and a lower level of inflation Oe. The policy rate of interest has decreased, consumption has increased investment has decreased, and a higher level of inflation Which one of the following statements best describes "deflation spiral"? Q4 O a. The central bank has already reduced the nominal policy rate of interest to 0%, but the real policy rate of interest remains high because expected inflation is very low Ob. The central bank has already reduced the real policy rate of interest to 0%, but the nominal policy rate of interest remains high because expected inflation is very low Oc. The central bank has already reduced the nominal policy rate of interest to 0%, but the real policy rate of interest remains high because expected inflation is very high Od. The central bank has already reduced the real policy rate of interest to 0%, but the nominal policy rate of interest remains high because expected inflation is very high All of the answers here are incorrect O e. Q5 It is easier for the central bank to keep output at potential output if expectations of inflation are: O a. All of the answers are incorrect Ob. Based on changes in the policy rate of interest Oc. Anchored Od. Changing from one period to the next Oe. Based on the last period's inflation

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